Glasgow EPB restructuring bonds to raise capital

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July 23, 2009

By LISA SIMPSON STRANGE The Glasgow Daily Times Thu Jul 23, 2009, 12:24 PM CDT

GLASGOW — The Glasgow Electric Plant Board has approved a resolution to refund and reissue two of the utility’s previous bonds.

Board members voted to adopt the measure during a special-called meeting at the EPB on Tuesday morning. Restructuring the bonds will give the utility additional funds to pay off existing debt and raise capital for the new East Glasgow Primary Substation.

The main issue is to pay off former costs, according to EPB superintendent Billy Ray.

Sam Conner of Hilliard-Lyons in Louisville was on hand at the meeting Tuesday and explained the reasoning behind refinancing the bonds at this time.

“We’re going to refund two bond issues and also provide about $4.9 million of new money for this new substation,” Conner said. “The purpose of the new substation is to give a second entry point in case of weather problems.”

Series 1997 and 2000 bonds will be the ones involved in the refinancing plan. Series 2009 bonds will be newly issued.

Part of the new money raised will pay for the cost of a transformer that will be used at the new substation.

“They’ve already purchased the transformer, which is $1.5 million and that was financed on a short-term basis by Edmonton State Bank,” Conner said. “Part of these proceeds will go to pay off ESB.”

Lower interest rates were a motivating factor for the board to take this action now.

“We sold bonds in 1997 and 2000 and interest rates now are lower. It’s just like refinancing your house. It’s precisely what we’re doing,” Conner said. “... We can refund those for a savings of about $125,000 a year.”

The savings will be greater than first anticipated because the bonds will be insured with a AA rating. The bond insurance

guarantees the plant board will pay off, Conner explained.

While the additional money will help partially pay for the new EGP substation, which will act as a power backup system for Glasgow residents, other sources of revenue will still be needed.

“We don’t know all the costs on the substation and won’t until later this fall, but the refunding is a bird in the hand, so that is what is driving the scale of this sale,” Conner said. “In a perfect world, we’d wait until October to do this, but the savings are at hand so we’re taking advantage of that right now.”

Ray said the board won’t know what the total capital outlay for the substation will be until bids are let in October, but he didn’t think the additional money raised with the new bond issue would cover everything needed for the new construction.

Board members will have to look at the costs in the fall and they and the people of Glasgow will have to decide if they are willing to make an additional investment to have the security of a redundant system and go through with the project, he said.

“There will be another day of reckoning,” Ray said.

The sale of the new bonds will begin on Thursday and will close the second week of August, according to Conner.

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